CHICAGO, Dec 22: Did China buy a large quantity of wheat this week, or was the price rally in futures at the Chicago Board of Trade and cash markets fueled by mere rumors?
Exporters had said on Wednesday, amid sharp gains in CBOT soft red winter wheat futures, that China had bought 200,000 tonnes of SRW wheat from the United States and another 50,000 tonnes of soft wheat of optional origin.
So far there has been no confirmation from the US Agriculture Department, which is supposed to be informed of any sale of US wheat totaling 100,000 tonnes or more within 24 hours.
But US grain traders said Friday that a seller does not have to register the sale with the USDA if the wheat is not of US origin, or is of optional origin — meaning that the transaction did occur but the seller could source the grain from other countries later.
There is a consensus in the trade that China did buy some wheat, said one senior grain dealer who handles exports, adding that one reason the sale was not confirmed by the USDA could be that the wheat was of optional origin.
They (seller) might want to keep it quiet because they could have some more business (with China) in the works. But things like these usually leak into the market, he added.
Grains analyst Charlie Sernatinger of E.D. & F. Man International said he had heard talk that the sale was done but then scuttled by the Chinese government because it had not issued any import permits to private Chinese buyers.
I hear that the business was done to a private guy earlier this week...that the central government went to the private guy when they heard that the business was transacted and told him to cancel the business because they haven’t given the TRQs to the private industry yet, he said.
As part of the agreement over its accession to the World Trade Organization, China has agreed to allocate quotas for the import of wheat, corn, rice, vegetable oils or sugar under a tariff rate quota (TRQ) system.
Of the total 2002 wheat quota of 8.5 million tons, 90 per cent is set to go to state firms and the rest to private companies.
Industry sources in Asia said Chinese traders have begun placing speculative orders ahead of Beijing’s allocation of the import quotas in the hope of winning some importation rights.
According to data from four major Chinese customs offices, China imported 199,303 tons of wheat from the United States between January and November this year 41.7 per cent of China’s total wheat imports during that period.
Grains analyst Shawn McCambridge said the CBOT futures market had been anticipating a wheat sale to China ever since the country bought a large amount of corn from the United States in November, and again in early December.
That explains the overexuberance when the rumor hit the (CBOT trading) floor, he said. The problem with rumored sales is that the market has about 24 hours of patience, and if it can’t be confirmed then it starts giving up on the business being done at all, he added.
He said the lack of confirmation led players to sell CBOT wheat futures on Thursday, taking the market down 3-1/2 cents to 5-1/2 cents per bushel after the March contract ran up 7-1/4 cents on Wednesday.—Reuters
